It’s not just sales engineers and technical consultants who are worried: supply chains – a never-ending story?

2020, corona, lockdown in Asia, containers are coming to a standstill in China’s major transshipment ports. The already strained supply chain problem is intensifying. Falling demand from Europe for electronic components in particular at the start of the pandemic in 2020 causes global production to slow down. In 2021, the first hopes for a recovery of the situation return, demand increases, the economy grows again, but the supply of raw materials and parts comes to a standstill again and more severely than before. At the end of March, the cargo ship Ever Given is stuck in the Suez Canal – like a symbol for global trade. Shipping transit times are lengthening and a shortage of shipping containers and pallets is exacerbating the symptoms. As if that weren’t enough, sea freight prices have risen around fivefold since coronavirus.

Parts shortage in electrical engineering

More coronavirus waves follow, bottlenecks on the labor market, supply chains break off. Since the end of February 2022, Russia’s war of aggression against Ukraine has turned the entire political and economic world order upside down. Uncertainty and fear on the one hand, energy costs going through the roof, general inflation in purchasing, a further intensification of the freight problem and a difficult to unpredictable view of the future on the other. Raw materials and components remain in short supply: in addition to various other sectors, electrical engineering in particular is affected by this, not least with passive components such as capacitors, inductive components, ferrites, protective components, transformers and resistors, but also with sensors.

How long will electronic components be missing?

Time and again, companies that install electronic components are reporting that they are having to cut back production because there is simply a lack of parts. The outlook is rather bleak. Experts such as Frank Sobotka, Managing Director of transport and logistics company DSV Air & Sea Deutschland, does not expect the situation to ease in 2022. In his opinion, improvements are conceivable for 2023 at the earliest. Namely, when free capacities for sea transport arise or companies have set up their supply chains more locally. (1) Meanwhile, war and port closures are leading to longer transport times. Delays and high freight prices are affecting global trade for much longer than originally expected at the beginning of the year.

Electrical industry particularly affected

Sobotka’s restrictions make it clear that there is no all-clear for 2023: the renewed lockdowns in China since the beginning of the year, the war in Ukraine and Russia, which has become unpredictable. Restricted logistics, production in Ukraine and China has come to a partial or complete standstill or is only able to operate to a limited extent. The effects are of course also being felt in Germany, where supply bottlenecks are becoming more acute. According to the ifo Institute, the situation for the German economy worsened again in March 2022. 80.2% of companies had to contend with bottlenecks and problems in material procurement, i.e. for preliminary products or raw materials (74.6% in the previous month of February). In the electrical industry, around 90% even reported supply problems. Companies also cite the trade standstill with Russia and Ukraine as a direct consequence of the war. (2) They are facing the challenge of restructuring or rebuilding their supply chains. An opportunity in the medium and long term. A catastrophe in the short term. In March, the Association of German Chambers of Industry and Commerce (DIHK) also reported “additional disruptions in the supply chain and logistics as a result of the war” for almost 2/3 of companies. (3)

Finding solutions: Listening. Thinking. Thinking along.

Even though the mood in the German economy has stabilized at a low level, expectations remain subdued. The assessment of the current situation in the manufacturing sector, including the electrical industry, remains below average. The search for and procurement of components remains a problem in the electrical engineering/electrical industry. Companies need to find solutions. In the medium and long term, to avoid being slowed down again in the future, or to a lesser extent by delays or the disruption of supply chains. In the short term, to ensure their continued existence, to secure jobs and their own existence. Companies should therefore not just be looking for pure customer or supplier relationships right now, but rather for partners who can take the pressure off them, support their business and move into the future together with them. Partners who listen, think and collaborate.

We are happy to think ahead with you – whether you are an existing customer or a prospective customer. Just get in touch with us!

Sources:

1. vgl. https://www.dw.com/de/2022-fünf-gefahren-für-die-weltwirtschaft/a-60195619

2. vgl. https://www.ifo.de/DocDL/sd-2022-sonderausgabe-april-sauer-wohlrabe-unternehmen-ukraine-krieg.pdf

3. https://www.dw.com/de/wirtschaftliche-erholung-abrupt-ausgebremst/a-61159340